Worldline - 2020 Universal Registration Document

THE PAYMENT INDUSTRY Key market trends and drivers of change

Financial Services in Europe are facing a range of regulatory changes that have the potential to create new outsourcing opportunities for payment service providers and to drive increased demand for value added services to create new revenue opportunities. For example: The revised directive on Payment Services, or PSD2, which ● came into force in the EU in January 2018, is transforming almost every corner of the payment services market. It has opened up the EU payment market to companies offering payment services, based on the concept of open, consensual access to information about the payment account. Introducing strict security requirements, PSD2 enables new players and new payment models to emerge in the market, including Third Party Providers (TPPs) and Fintechs; Instant Payments went live in November 2017. As a result, ● in many European countries it is now possible to make euro credit transfers in less than ten seconds. Consumers are able to make online purchases at all times, including at times when many traditional payments alternatives are not Tech giants such as the GAFA (Google, Apple, Facebook and Amazon) and BATX (Baidu, Alibaba, Tencent and Xiaomi) are leveraging their client access and financial power to revolutionize the payment sector through specific technologies and end-to-end services (including Google Wallet, Amazon Go, Alipay, WeChat Pay…). New Fintechs, unencumbered by legacy technologies are also changing the way consumers interact with financial service providers as Worldline sees a new wave of digital only banks for example and other fintech leveraging PSD2 and open banking to offer payment initiation and financial management services. 91% of banks and 75% of fintechs say they expect to partner with each other in the future. In this new competitive environment, banks will have to adopt shorter development cycles and business models which incorporate revenue sharing and different pricing models. Large banks in Europe clearly understand that the platform economy is the new normal for their business, and they have

available. On their side, suppliers and retailers will enjoy the certainty of receiving payment as soon as they provide their products or services. Although it is still in its early stages, and take-up of the technology by consumers and businesses is only nascent, Instant Payments has the potential to be one of the biggest game-changers in the payments sector. According to some forecasts, there may be € 725bn in annual instant payment transactions for e-commerce and at the point-of-sale by the end of 2027. It seems clear that the innovation has the potential to reduce the cost of managing cash and cheques and could make major headway in various sectors. For example, according to the European Payments Council, Instant Payments have the potential to develop in the peer-to-peer (P2P) and person-to-business segments in situations where cash and cheques are currently widely used. Instant Payments are likely to go much further than P2P to address business-to-business (B2B) payments and even machine-to-machine (M2M) payments with the rise started to move accordingly (including BCEE and BIL in Luxembourg, ING in the Netherlands, Hello bank! In Czech Republic). For their part, challenger banks and new specialist banks, which were born in this new world of digital services, are in prime position to take advantage of the changing landscape. Providers of innovative mPOS solutions such as iZettle, SumUp, Square, Poynt and Payleven have also intensified their activity due to the increase in the use of smartphones all over Europe. Beyond smartphone-based acceptance devices, providers of new software-only solutions (softPOS) have appeared and started to certify their solutions. Although these solutions are newan d nascent, they are likely to intensify the competitive landscape but also offer new opportunities to target merchants that are not equipment with payment acceptance solutions. In almost every single European country start-ups are building businesses around mobile transactions, challenging traditional players. of connected devices in our lives.

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New entrants and their impact on the industry business model B.4.4 also create new opportunities for payment services Providers

Universal Registration Document 2020

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